Sovereign wealth funds and central banks have pulled out of stocks and moved into bonds which now account for the biggest share in their portfolios, reversing a five-year trend in the wake of volatile global stock markets, according to an Invesco survey.

The company polled 139 global sovereign investors in March, including one-third from Asia Pacific, representing US$20.3 trillion of assets in total.

Their bond allocation rose to 33% in 2019 from 30% last year, while their exposure to stocks reversed by the same magnitude, Invesco says in a statement on July 8 on the survey findings.

According to the company, the reallocation “marks the end of a five-year trend between 2013 and 2018 during which fixed income fell from 35% to 30% as equities posted strong gains”.

Invesco says weak and volatile stock markets more than halved the average return of the investors to 4% last year from 9% in 2017, noting however that this was an outperformance compared to the 8.7% decline in the MSCI World Index.

Looking ahead, Asia Pacific respondents are keener than their global counterparts to move back into stocks. One-third of them plan to increase allocations to stocks over the next 12 months versus 22% of their global peers.

According to Terry Pan, Invesco’s chief executive officer for Greater China, Southeast Asia and Korea, although global sovereign investors have been in a risk-off, defensive mode, there are regional variations on their asset rebalancing.

“Fixed income has re-emerged as the primary allocation for asset owners, but a high proportion of Asia Pacific respondents plan to either maintain or increase their exposure to equities,” Mr. Pan says in the statement.

He also highlights infrastructure as “another major trend” in Asia Pacific. All respondents from the region hold some infrastructure assets in their portfolios compared to 84% of their global counterparts.

The survey also found that the investors overall remain “optimistic” about China despite its trade tensions with the US. China scored an average rating of 6.1 points out of ten as an investment destination over the next three years, up from 5.2 points in 2017.